I make around $5k-$6k a year from gigs. Other than just saving it, what are some good ways to use this money to improve my financial situation? It doesn’t feel like enough to invest, and past business attempts haven’t worked out. What else could I do with it besides paying bills and saving?
$5,000 a year may not seem like much, but if you invest it consistently, it can add up. Over 10 years at a 10% return, it could grow to a solid amount. Have you considered investing in index funds?
Kara said:
$5,000 a year may not seem like much, but if you invest it consistently, it can add up. Over 10 years at a 10% return, it could grow to a solid amount. Have you considered investing in index funds?
I agree with this. Consistency is key.
Kara said:
$5,000 a year may not seem like much, but if you invest it consistently, it can add up. Over 10 years at a 10% return, it could grow to a solid amount. Have you considered investing in index funds?
That’s an interesting take. Could you break down the numbers?
If it were me, I’d invest 75% and use 25% for fun. That way, you’re building for the future while still enjoying some of the money now.
Blane said:
If it were me, I’d invest 75% and use 25% for fun. That way, you’re building for the future while still enjoying some of the money now.
This is a great balance. Having guilt-free spending money while still saving is a solid plan.
Consider maxing out a Roth IRA. The contribution limit is currently $7k per year, so your gig income could go straight into that.
Wilkie said:
Consider maxing out a Roth IRA. The contribution limit is currently $7k per year, so your gig income could go straight into that.
I already contribute $1,500/month to my 401k and plan to max out my Roth IRA soon. What should I do with extra income after that?
@Nate
Look into the next best tax-advantaged options or a brokerage account.
@Nate
After maxing out tax-advantaged accounts, putting the rest in a brokerage account is a solid move.
Use it to pay off debt, build an emergency fund, or invest in learning a skill that could increase your income.
Zach said:
Use it to pay off debt, build an emergency fund, or invest in learning a skill that could increase your income.
That makes sense. How much should I aim for in an emergency fund? I’ve heard $10k or six months of expenses.
@Yun
It depends on your situation. If you lost your income tomorrow, how much would you need to get by? If you own a home or car, factor in repair costs too. Keeping cash in a high-yield savings account (HYSA) could help. Also, investing $5k per year for 10 years at ~9% could turn into $75k—something to consider.
Put it in a high-yield savings account (HYSA) to earn more interest than a regular savings account.
If you have any high-interest debt, paying that down should be the first step before anything else.
You can invest small amounts in a total stock market fund. Even $1 can get you started at Fidelity or Vanguard.
Besides paying off debt or investing, you could use the money to improve your skills through courses or certifications that might help you earn more.
If this gig income is regular, consider integrating it into your overall budget so you have a structured plan for using it.
Autumn said:
If this gig income is regular, consider integrating it into your overall budget so you have a structured plan for using it.
It varies—some years it’s more, some years less, so it’s not completely reliable.
Make sure you’re setting aside enough for taxes if this gig income isn’t taxed automatically.